USD strengthens following key data releases
Daily Currency Update
The US dollar had a noteworthy rise on the second working day of the year. The advance may be explained by investors seeking refuge in the greenback ahead of the key jobs data which is scheduled to be released this week. During the Federal Reserve’s last meeting held in 2023, the market noted a dovish stance, remaining hopeful about easing inflation trends and ruling out rate hikes in 2024. Markets anticipate rate cuts in March and May and small odds for the easing cycle to start in the approaching January’s meeting, which may put a cap on the USD’s momentum. On the data front, the economic activity in the manufacturing sector grew in December for the second consecutive month. The ISM Manufacturing Purchasing Manager’s Index (PMI) improved to 47.4 from 46.7 in December 2023, surpassing expectations of 47.1. The US JOLTS Job Openings in November were also released. This showed less hiring potential than expected, with 8.79 million jobs available versus the forecasted 8.85 million. October’s JOLTS openings were also revised up slightly from 8.733 million to 8.852 million.Key Movers
The EUR struggled to retrace the recent losses against the USD and faced challenges due to the risk-off market sentiment. Markets players are expecting rate cuts from the European Central Bank (ECB) as a measure to prop up the economy. Furthermore, ECB’s policymaker Pablo Hernandez de Cos emphasized on Tuesday that the ECB’s decision to start cutting interest rates would be data-driven and the economic data uncertainty remains high. However, markets seem to have estimated approximately six rate cuts from the ECB in 2024. Even the moderate German Unemployment data for December seemed to have weighed on the euro. The data showed that the number of unemployed people increased by 5,000 against the market expectations of a 20,000 increase. The EUR/USD pair was last seen trading at 1.0913 levels.The GBP continued to remain vulnerable following Tuesday’s intense breakdown. The GBP/USD pair was seen battered after the market players reconsidered the positive sentiment underpinning the rally in risk-sensitive assets. The deepening recession fears and a vulnerable manufacturing sector in the United Kingdom economy also played a key role in dampening the appeal for the GBP. The manufacturing sector in the United Kingdom remained at risk as the overall demand in the domestic economy, and from the overseas market, had been bleak due to high interest rates and an extending cost of living crisis. The pair was last seen trading at 1.2640 levels.
The CAD fell against the USD for the fifth consecutive trading day. This comes on the back of the Greenback getting bolstered against the broader FX market sentiment on the release of the US ISM Manufacturing PMI for December. There is no key data release expected from Canada today. West Texas Intermediate (WTI) oil was last seen trading near the 72.44 level on the back of a heightened oil supply and amid the market expectations for diminishing rate cuts. The USD/CAD pair was last seen trading at 1.3358 levels.
Expected Ranges
- EUR/USD: 1.0902 - 1.0963 ▼
- GBP/USD: 1.2616 - 1.2648 ▼
- AUD/USD: 0.6708 - 0.6776 ▼
- USD/CAD: 1.3305 - 1.3364 ▲